Low U.S. jobless claims underscore labor market strength

A man fills out a form at a booth at a military veterans' job fair in Carson, California October 3, 2014. REUTERS/Lucy Nicholson

WASHINGTON (Reuters) - The number of Americans filing for unemployment benefits fell more than expected last week, suggesting the labor market remains on solid footing despite slowing economic growth and a stock market rout.

Initial claims for state unemployment benefits declined 16,000 to a seasonally adjusted 269,000 for the week ended Feb. 6, the Labor Department said on Thursday. Economists had forecast claims falling to only 281,000 in the latest week.

The drop pushed down claims to near their post-recession lows around 256,000, pointing to very low layoffs even as the domestic economic outlook becomes increasingly uncertain.

“The economy might be sailing into a storm, the financial markets say, but if so, the U.S. economy is in a very strong position to weather whatever comes, with the labor market the strongest in decades,” said Chris Rupkey, chief economist at

MUFG Union Bank in New York.

The report was overshadowed by escalating fears over global growth, which sent the yield on the benchmark 10-year U.S. Treasury note plunging to a more than three-year low. U.S. stock indexes fell more than 1 percent.

The dollar fell to a 15-month low against the yen as the darkening global growth outlook and equities sell-off reduced the possibility of an interest rate hike from the Federal Reserve this year. Prices on fed fund futures, used to predict future U.S. policy rates by the Fed, surged across the board.

The U.S. central bank raised its benchmark overnight interest rate in December, the first hike in nearly a decade.

Fed Chair Janet Yellen told lawmakers on Thursday the central bank was evaluating the global financial market and economic developments, but said “at this point I think it’s premature to make a judgment.”

TEMPORARY RISE

Claims drifted higher at the start of the year. That had raised concerns that the headwinds of a strong dollar, weak global demand and spending cuts in the energy sector, which have constrained growth, could be spilling over to the labor market.

“It appears that at least some of that deterioration was related to temporary factors including an unfavorable shift in the weather and perhaps layoffs of temporary workers following the holiday season,” said Daniel Silver, an economist at JPMorgan in New York.

The four-week moving average of claims, considered a bettermeasure of labor market trends as it smoothes week-to-week volatility, fell 3,500 to 281,250 last week.

Claims have now been below the 300,000 threshold, which is associated with strong labor market conditions, for 49 straight weeks - the longest spell since the early 1970s.

The government reported last week that nonfarm payrolls increased 151,000 in January, while the unemployment rate fell below 5 percent for the first time in eight years.

A report on Tuesday showed Americans growing more confident in the labor market, with the number of people voluntarily quitting their jobs hitting a nine-year high in December.

“Thus far, there is no sign that the volatility in markets has produced a rise in layoffs,” said John Ryding, chief economist at RDQ Economics in New York.

The claims report showed the number of people still receiving benefits after an initial week of aid fell 21,000 to 2.24 million in the week ended Jan. 30.